# PS2 - Econ 277A Winter 2011 Problem Set 2 Problem 1 Arne...

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Unformatted text preview: Econ 277A Winter 2011 Problem Set 2 Problem 1 Arne, Barack, and Christy are four regressions away from completing their doctoral disser- tations, and they have four days in which to finish. If one of them spends h t hours running regressions on day t , her utility that day is given by u t =- h t . The production function for regressions is r t = √ h t . Completing the dissertation provides no utility—it is merely a binding constraint! So expected utility is simply the appropriately-discounted sum of effort costs. Assume δ = 1 throughout. a) How many regressions does Arne, a TC with ˆ β = β = 1, run each day? b) What about Barack, who is naive about his present-bias ( ˆ β = 1, but β = 1 2 ? Also, on day one, how many regressions does he plan to run each day? c) What about Christy, who is like Barack, but sophisticated about her present-bias? Discuss your approach to working out your answer. Problem 2 Nina lives three periods. In period 0 she is born with \$2 and can save any amount, s , of this wealth in an illiquid asset (a two-period CD) that yields (1 +...
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PS2 - Econ 277A Winter 2011 Problem Set 2 Problem 1 Arne...

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